Hongkong and Shanghai Banking Corp. said over the weekend it expects the Bangko Sentral ng Pilipinas to maintain the monetary policy settings in its last two meetings of the year as inflation would likely remain manageable.
“Moving forward, we think the BSP will keep its policy rate steady at 6.50 percent in the November and December Monetary Board meetings. After all, core inflation is still threading downwards, which means the BSP’s tight monetary stance is already in the works,” HSBC said in a report.
The BSP raised the policy rate by 25 basis points to 6.5 percent in an offcycle move last week to rein in inflation.
“Since the off-cycle hike is pre-emptive in nature, we don’t think the BSP will hike interest rates in its November rate-setting meeting, even if the Fed hikes in November,” it said.
The BSP maintained a very hawkish tone and will likely continue doing so because of its openness to resume tightening if inflation continues to be sticky, HSBC said.
BSP Governor Eli Remolona said last week monetary authorities would likely opt for a 25-basis points increase, if another rate adjustment would be warranted next month.
“If there is a hike, [it’s] more likely 25 [basis points] than 50, but [it] depends on the data…if there is a hike,” Remolona told reporters Friday.
“The likely scenario is… I’m not sure 25 would be justified. There is a good chance we won’t hike. There is a good chance we will pause. There is a chance we might hike, but 50 [bps] is a bit of a stretch,” Remolona said.
Remolona said local monetary authorities decided to raise the policy rate by just 25 basis points to 6.5 percent on Thursday, instead of a bigger 50 basis points, because they were waiting for more data.